More deeply into debt?

'A global scandal', 'Enslaving the poor', 'Something must be done', 'We can do it': these are just a few of things being said about inter-national debt.

The prominence of the debt issue reflects both the severity of the problem and the success of Jubilee 2000 and other campaigns in moving it up the agenda in political and church circles. This concern for the world's poor is encouraging to see.

Christians should be concerned about debts and forgiveness. Both Old and New Testaments have a lot to say about stewardship, the importance of helping the poor and the need for forgiveness. Jesus taught us to forgive others and used financial debt as an illustration of our deeper, spiritual debt to God. Coupled with this, the Scriptures prompt us to right injustice and transform socio/economic structures where these are unjust.

But it is not enough for the debt campaign to be theologically sound. The challenge facing us is to be biblical, motivated by love for our neighbours and rooted in a sound grasp of economic reality. This is not easy: the church's forays into economics have not always been distinguished by these things!

Many factors

The debt issue is a complex one, but in the church we often address it in simplistic terms. We are naturally moved by the poverty which characterises much of the world, and it is easy to suppose that debt is the main cause. Certainly, debt is a cause, reflected in the fact that much of Africa spends more on debt repayments than on health and education services: it is abundantly clear that debt repayments constrain the resources available to pay for basic needs. The case for debt cancellation in, at least, some cases is therefore very strong from both theological and economic viewpoints.

But debt is only one factor among many. Some of the biggest debtors have little problem making repayments so the problem is more one of capacity to repay than the size of the debt. The underlying problem, therefore, is more one of low income and adverse trading circumstances than of debt.

There is huge variety among the situations of debtors and creditors. The debts of developing countries as a whole are mainly to commercial lenders, but the poorest countries are indebted primarily to governments and multilateral organisations. Different loans are assessed according to different criteria and agreed for different reasons, so it can be misleading to lump together commercial, bilateral and multilateral debts.

It is disappointing when any campaign led by the church generates among its supporters simplistic misconceptions of the problem, but this is what we find with debt cancellation. At times it seems there is only one Christian voice on the subject, explaining the crisis in simplistic terms and placing the blame on creditors such as the World Bank: this kind of explanation does not reflect reality.

Weaknesses

Alternative voices are seldom welcome: some suppose those who express different views to be unconcerned, perhaps even un-Christian for questioning the case for debt forgiveness. Yet it would be tragic if the case for helping the world's poor through debt reduction were to be undermined by over-simplification in its reasoning. Any response to debt which is too simplistic will be doomed to failure amid the harsh realities of international economics.

There are four fundamental weakness in the church's current approach:

1) There is confusion about which debts in which countries should be cancelled, what the word 'unpayable' means and who should define it. We need to be clear whether we are seeking cancellation of the unpayable portion of the debts of the poorest countries, or a 'debt-free start for a billion people' (a Jubilee 2000 slogan): these are altogether different things. One person's 'can't pay' is another's 'won't pay', and there are many different agendas within the debt lobby. Debt cancellation may be appropriate in some cases, but not all: we have to have a clear target before we have any chance of hitting it.

2) The second weakness relates to the impact of the campaign on poverty, even if it succeeds in prompting debt cancellation. Cancellation of debts may salve consciences in rich countries, but would only scratch the surface of underlying need in most poor countries. Many African villagers might not notice any perceptible change in their circumstances even if the whole of their countries' debts were cancelled.

The development minister, Clare Short, has rightly said that debt cancellation is not a 'magic bullet': it is naive to suppose that reducing debts will necessarily result in increased health and education spending as opposed to more arms spending and corruption. The key is how to get improvements, and this is a major challenge to priorities and government policy in developing countries. Any cancellation of debt which is not accompanied by rigorous and enforceable conditions will not succeed in helping those in greatest need.

3) Debt cancellation may not be in the long-term interest of some developing countries if it makes it harder for them to obtain loan finance in future. Whatever is said about debt cancellation now being a 'one-off' event, anything that happens once can be repeated, so lenders will inevitably think twice before approving marginal loans in future. And, of course, any debt cancellation will reduce the flow of funds which can be recycled for future loans to developing countries. There is also the matter of the perverse signals which debt cancellation can send to some debtors. Some countries may get the impression that bad debts don't matter, because they get forgiven eventually, others, such as Malawi, which have struggled to live within modest means, could effectively be punished for their probity while their more profligate neighbours have their debts cancelled.

4) Serious misunderstanding and factual errors about the aims and workings of the World Bank, IMF and the world financial system are widespread among those calling for debt cancellation. We need to be better informed, and also clear and honest about whether we are guided primarily by theology or more political notions of social justice. This is not to say that the latter is 'wrong' and, of course, the two cannot be easily separated, but in some cases it is a short hop from liberation theology to Marxist ideology which has been tried and found wanting in many countries. All Christians and especially those of evangelical persuasion, should be cautious about promoting even a good cause as 'normative' for Christians, if its roots are as much political as theological.

Rigorous analysis needed

One Christian who recently heard my sceptical views on debt cancellation demanded to know what I am trying to do: this is a fair question. Am I suggesting that we should throw our hands in the air, do nothing? To this question I would answer an emphatic 'No!': the severity of the problem is too great and the stakes too high for this to be a defensible Christian response.
But the very seriousness of the issue means that we must not mask misunderstanding with good intentions or over-simplification. To do so would be to let down the world's poor, ourselves and God himself. We need solid, coherent foundations and rigorous analysis, or we will lack credibility, and the argument for debt forgiveness will be fatally undermined.

Most people's concern for the poor may not be matched by detailed knowledge of international finance, but most of us are capable of thinking about the debt issue more deeply than some seem to realise. Most of us are financial debtors is some way, for example, with a mortgage, hire-purchase agreement or a personal loan, so we can appreciate the reasons for borrowing and many of the circumstances which cause some borrowers to get into trouble, albeit on a rather different scale.

Debt relief essential

There is considerable merit in the case for debt relief for the poorest countries. This is recognised by almost all in the development business and is one reason why Jubilee 2000 has achieved some success already by winning limited debt cancellation from some creditor governments. The need for debt relief is also reflected in programmes like the Heavily Indebted Poor Countries (HIPC) initiative managed by the World Bank and IMF. Many Christians and others have criticised this approach, because it is too limited and too slow, but it is perverse to ignore HIPC altogether, since its aims have much in common with what is demanded by those pressing for a more radical and generous solution.

Concern to do something is genuine and laudable, but we cannot address a problem which is complex and varied with a solution which is anything less. And we need to strengthen, not oppose, other initiatives such as HIPC which address the debt problem and whose objectives we share. However passionate we may feel about our cause, we need to support it with analysis which is dispassionate and rigorous enough to convince those much more sceptical and hostile than ourselves. There is a long way to go.

David Price spent ten years as an economist working on overseas development. He is now a clergyman in the Guildford diocese.

A different perspective on the campaign by Jubilee 2000 for world debt to be cancelled

Many factors

Weaknesses

Rigorous analysis needed

Debt relief essential

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